Lower or Scrap RRIF Minimum Withdrawal Requirements: C.D. Howe Institute

This makes too much sense to be coming from the CD Howe Institute.

The CD Howe Institute is intent on destroying the life savings of Canadian at the behest of their corporate members. The CD Howe is a proponent of one set of income trust rules for RRSPs and another for pension funds. This caused average Canadians to lose $35 billion. Thanks CD Howe.

As for this policy of scrapping minimum RRIF withdrawals, it shouldn’t matter to the government, since the government would have us all believe that RRSPs RRIFs etc are “tax exempt” and never, ever pay taxes.......which is the intellectual flaw in Flawherty’s tax leakage canard and promulgated by the CD Howe Institute and by no one more so that Jack Mintz, former head of the CD Howe Institute.


Lower or Scrap RRIF Minimum Withdrawal Requirements: C.D. Howe Institute

Toronto, July 10 – Current tax policy forces seniors to make minimum withdrawals from Registered Retirement Income Funds (RRIFs) whether or not they make financial sense and these minimums should be reduced or abolished, according to a study released today by the C.D. Howe Institute. In “A Better Riff on Retirement: The Case for Lower Minimum Withdrawals from Registered Retirement Income Funds,” author William B.P. Robson notes that since 1992, when changes to the Income Tax Act last adjusted minimum withdrawals, life expectancy is up and real returns on investment are down. As a result, RRIF holders now face dramatic erosion in the purchasing power of tax-deferred savings in their later years.
Often at retirement, and no later than the end of the year they reach age 71, many savers must annuitize or put their retirement funds into a RRIF. The Income Tax Act prescribes that RRIF holders withdraw a minimum of 4 percent of the beginning-of-year balance at age 65, then an escalating minimum until, from 94 onward, holders must withdraw 20 percent of their balances each year.
Robson argues that the present-value cost to governments of tax deferral in RRIFs is not major, but for RRIF holders, being forced to run down RRIF assets poses a threat. Running tax-deferred assets down rapidly can expose withdrawals and any returns from reinvestment to income taxes and benefit clawbacks, and holders may reach advanced age with tax-deferred assets badly depleted. When the current rules were established in 1992, this threat was not major, but life expectancy is up since then, and real returns on investments are down. RRIF holders now face dramatic erosion in the purchasing power of tax-deferred savings in their later years, says Robson, who concludes that the minimum withdrawal rules should be liberalized, or abolished altogether.

The e-brief is available at http://www.cdhowe.org/pdf/ebrief_58.pdf.

For further information, contact:

William B.P. Robson,
President and CEO,
C.D. Howe Institute,
416-865-1904
Email: cdhowe@cdhowe.org